Insight

OpenJaw CTO: Blockchain and the travel industry

08/04/2017|4:21:25 PM|Brian Lewis, CTO of OpenJaw

Where in the travel industry does Blockchain fit? Some of the more realistic uses may be closer to governance, administration, identity management and security rather than a disruptive change to existing B2C business models.

Since Bitcoin first appeared in 2008/2009 and solved digital currency’s seemingly intractable ‘double spend’ problem (how to stop someone using the same digital ‘coin’ twice without a central issuing authority or bank) people have been looking for the next ‘killer application’ for the technology that made it possible: Blockchain.

Bitcoin’s crypto-currency magic has fuelled the hype behind Blockchain, but this hype belies a shallow understanding of what Blockchain can and can’t do.

This is not surprising, as to say you truly understand Blockchain (which in polite company is now often referred to as “Distributed Ledger Technology” to avoid those ‘negative branding issues’) you would need to recognize and be able to explain the following equation:

Not something us mere mortals would want to spend our time doing, and in truth not required to have some comprehension of how Blockchain works. However, the real problem is that what passes for an explanation of Blockchain in articles outlining its ‘potential to change everything’ invariably demonstrates limited insight into what it fundamentally does.

A random sample of articles reveals that Blockchain works because it is: ‘decentralized’, ‘secure’ and ‘can be read by anyone’ – which is interesting and mostly true, but it’s not the reason it can do its ‘magic trick’ and points to the real problem in all this: if you don’t understand what a technology does, how can you create or evaluate use cases for it?

Explaining why Blockchain is so astounding without resorting to equations and coding algorithms is difficult. So, for the most part, simplified descriptions and analogies have to pass for common currency when discussing it.

The trouble is that you can’t make decisions on Blockchain based on analogy, you need to know the details and ideally the maths. If you have a sense that Distributed Ledger Technologies (DLTs) like Blockchain are secure, distributed databases that can remove middlemen, then you look for instances in your industry that seem to match that description, without understanding if the specific use case truly makes sense.

In the second part of Blockchain series, I will explain in detail as to how Blockchain works and its origins, but for now, it will be enough to understand these necessary attributes for any given implementation:

• Fully distributed data
• An immutable record of transactions
• No central governing or issuing authority
• Incentivized participants who ‘mine’ or ‘forge’ blocks (confirm transactions, ensure integrity of the ‘chain’)
• A reliance on no single entity controlling 50% or more of the network
• Inherently slow performance
• Heavy resource usage

Some of the above list may surprise you. To allow Blockchain to do its magic it will by necessity be comparably slower and heavier on CPU usage than other technologies. It will also need participants who are actively willing to spend money and time collecting transactions into blocks, then run resource heavy algorithms over them so they can be added to the chain. This is not a limitation of current implementations or existing hardware, these are core attributes of how a Blockchain works. There are variations out there and some have better performance than others, but removing those key features means it is no longer a Blockchain and can no longer do the ‘magic trick’ that got everyone so excited about it in the first place.

So, where in the travel industry does Blockchain fit? Where could we use a slow, resource hungry database that you can’t alter and which requires an incentivized network of users in order for it to work?

Some of the more realistic uses may be closer to governance, administration, identity management and security rather than a disruptive change to existing B2C business models.

The ability to guarantee the provenance of something with transparent and distributed data that (for the most part) can be confirmed by anyone but updated by no one opens possibilities for everything from Federated Identity Management to Aircraft Part Registries. Combine Blockchain with smart devices using Trusted Execution Environments and you have the possibility of a trusted, federated digital identity.

Use cases where the lack of speed and real-time updates are less important than the secure replication of immutable ‘always available’ data amongst parties who all have a personal stake in keeping everybody else honest would seem the most likely to succeed.

When looking at other proposed uses, it is worth remembering that often quoted statistic: VISANet handles around 1700 transactions per second with a theoretical limit of 56,000 whilst Bitcoin is currently processing between 3 and 4 with a theoretical limit of 7. There are faster Blockchains out there than Bitcoin’s but they are certainly not 600 times faster. The Bitcoin network currently has an annual power consumption comparable to that of Ireland, which is being paid for by ‘miners’ because it is backed by a crypto-currency and it is currently profitable for them to do so. All of this should give you pause for thought when weighing up proposals for distributed marketplaces or supply chains based on Blockchain that could operate at the scale and speed required in the travel industry.

As two prominent blockchain tech researchers, Michael Mainelli and Alistair Milne, state:
"Current interest in mutual distributed ledgers has established significant momentum, but there is a danger of building unrealistic expectations [...] Understanding of the technology lags well behind the hype [...] ‘Blockchain’ technology seems to promise major change for capital markets and other financial services, but few can say exactly how or why."